Defence Industry

Outsourcing of Defence Production
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Issue Book Excerpt: From the Crow\\\'s Nest | Date : 20 Jun , 2012


The Kelkar Committee report, as you know had focused on “strengthening self-reliance in defence preparedness”, and this has logically led them to recommend measures which will create synergies between the private and public sectors, thereby involving the country’s best industrial resources in defence capability building.

There used to be a school of thought in the Armed Forces, which said: “my job is to defeat the nation’s enemies, and I don’t care if I do it with an Indian bullet or an imported one. Just make sure that I have a bullet that works, and that its there when I need it.” Now this may sound incredibly shortsighted, but it reflects the soldier’s impatience with delays, which had become endemic in our procurement system.

But over the years, we have become wiser and learnt through bitter experience, that in the long term, it is only the metaphorical “Indian bullet” which will actually defeat the enemy and truly save the nation. The scrapping of the Industrial Policy Resolution of 1956 and opening of the defence sector to private industry is very much a part of this process, which will give us the “Indian bullet”.

There are many who criticize India’s early leadership for the heavy emphasis on state control and investment in the Public sector. Hindsight does bring a lot of wisdom, and it is now obvious that countries have to evolve policies to suit the needs of a particular time, and specific situation.

“¦ everything has a time and place, and it is clear that private participation in defence preparedness is an idea whose time has come.

Would India be the kind of “industrial” and “knowledge” power that she is today, if it were not for the state driven initiatives of the 1950s and 1960s that created the IITs, the heavy industry, the research laboratories, the shipyards, the aircraft factories and many centres of excellence? On the other hand, would this country have realized its tremendous potential, had the barriers of state control not been brought down by Dr Manmohan Singh’s historic initiative to liberalize and globalize in 1991.

So obviously, everything has a time and place, and it is clear that private participation in defence preparedness is an idea whose time has come.

The extent of private sector involvement vis-a-vis the defence outlay has been comparatively limited this far. Why is this so? To an extent this could be attributable to the acquisition procedures hitherto and non-involvement of the private sector at the project conceptualization stage. On the other hand, the private sector often looks at short-term investment and returns, which inhibit strategic investments. The inability to export is another constraint; since the quantities required may often be restricted, there have to be concerted efforts to promote exports, within the bounds of national security.

The first issue that needs to be addressed is: ‘What’ product is required, and secondly, the nature of participation of private sector. In this regard the Navy had prepared a 15-year indigenization plan that was well received by the industry. A Science and Technology roadmap has been drawn up for the Navy that identifies the ‘end-product’ capabilities that needs to be built over the next 20 years. This has recently been presented to the DRDO, and the Department of Defence Production, and we will pass it on to the industry too. This roadmap gives a clear picture of technologies and products that are foreseen for induction and will further help define what can be taken up by industry.

Not only will this private-public teaming up create a most powerful synergy in warship building, but the resultant diversification will also be a force-multiplier for national security by creating centres of excellence.

Ever since we launched the first Indian-built warship, INS Nilgiri, in the late 1960s, the shipbuilding industry has been the flag bearer of our drive for indigenisation. Today the Navy’s force planning process is heavily dependant on the capacity and productivity of our public sector shipyards, and unless they can deliver a certain number of ships/submarines a year, our force levels are going to slip. The good news is that the order books of the shipyards are now filling up rapidly, but the bad news is that with their best efforts, they lack the infrastructure, the capacity and the productivity to deliver ships at the rate that the Navy needs.

So it is clear that the time has come to invite the private sector to contribute to warship building in whatever manner possible: public-private partnerships, joint ventures, outsourcing or subcontracting. Not only will this private-public teaming up create a most powerful synergy in warship building, but the resultant diversification will also be a force-multiplier for national security by creating centres of excellence.

The Navy’s other focus area is Information and Communication Technology or ICT, in which the private sector has distinct strengths. The Navy is on the threshold of an exciting new era in which we hope to network all our platforms at sea; ships, submarines, aircraft, and Unmanned Aerial Vehicles (UAVs) with our operational centres ashore. To provide coverage over the entire Indian Ocean, we will need a ground segment and later a space segment.

The Navy expects substantial participation by the private sector in building the structures for “Network Centric Warfare” or NCW, which is dominated by ICT. Providing connectivity for the Navy is a challenge, as dispersed forces operate over large ocean areas, making satellite and radio communication the only options. Moreover, the tri-axial movement of ships at sea complicates antenna design. The private sector has the strength for various building blocks in which software development will play a major role. The task is enormous and will have to be implemented in phases, as it must factor legacy systems already in service.

For all our sincerity and earnestness, the Navy’s past endeavours to indigenize and to develop production sources in the private sector have lacked cohesion, continuity and above all, adequate financial support. We hope to overcome these handicaps through the creation of a Directorate of Indigenisation, which was inaugurated on the September l, 2005.

I want to pay tribute to the wisdom and vision of my friend, Shekhar Dutt, who as the Secretary DP&S made a very generous offer to transfer a part of the Directorate General of Quality Assurance, which looked after indigenisation, to the Navy. With the approval of the Scorpene Project, we have embarked on the path of acquisition of national competence in submarine building. One of the first projects for this Directorate is going to be: to study the Scorpene submarine and to see how much of its components can be farmed out to private industry.

To move ahead, there is a clear need for dedicated groups comprising representatives from the Services, Department of Defence Production, DRDO and the Private Sector to address ‘specific thrust areas’ identified by each of the Services. These groups would be better able to define requirements, identify the model and extent of participation of the private sector, and work out the methodology for meshing in with current acquisition procedures and processes.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Admiral Arun Prakash (Retd.)

Former Chief of the Naval Staff of the Indian Navy, Chairman Chiefs of Staff Committee and author of From the Crow’s Nest.

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